While most economists and market analysts are looking at statistics and data to determine whether the economy and consumers are improving or rolling over, my take is different. I view the economy and consumers as adapting to the new dynamic at work in our country.

Economists point to the drawdown in inventories as a reason why future GDP reports will rebound strongly. That rebound will only occur if consumers start spending. I personally do not expect that will happen to a meaningful extent anytime soon.

Tudor Investment Corp., the $10.8 billion hedge fund firm run by Paul Tudor Jones, told clients that the gain in U.S. stocks in the past 100 days is a “bear- market rally.”

“Impressive counter-trend rallies are a feature, not an oddity, of secular bear markets,” the firm said in an Aug. 3 investor letter. “We are not inclined to aggressively chase the market here. Rather, we eye a better opportunity to be long equities into year-end on a potential autumnal pullback.”

The Standard & Poor’s 500 Index of the largest U.S. companies has climbed 47 percent since falling to a 12-year low on March 9. The index broached 1,000 for the first time in nine months this week after companies reported better-than-expected profits.

“Investor psyche is still fragile,” Greenwich, Connecticut-based Tudor said. Slowing growth in China and the return of front-page stories on swine flu are “further catalysts for global equity markets to pause in September,” the letter said.

Tudor is viewed as one of the top money managers in the business. I respect his opinion.

Economists at Goldman Sachs Group Inc. and Deutsche Bank Securities Inc. changed their July employment forecasts to predict a smaller drop in payrolls.

Jan Hatzius, chief U.S. economist at Goldman Sachs in New York, projected the world’s largest economy lost 250,000 jobs last month, down from a previous estimate of 300,000, according to a note to clients. Joseph LaVorgna, chief U.S. economist at Deutsche, changed his projection to a loss of 150,000 jobs, the lowest of any economist surveyed, from a decline of 325,000.

Neither changed projections for the unemployment rate, with Hatzius calling for it to climb to 9.7 percent and LaVorgna estimating it will rise to 9.6 percent from June’s 9.5 percent.

Having dealt with numerous economists over the years, I know they take tremendous personal pride in the accuracy of their calls. I am not a conspiracy theorist, but I find it somewhat uncanny that Mr. Hatzius is upping his forecast the day before the report for the second month in a row.

I believe the Bureau of Labor Statistics does heavily massage this report.

Check in tomorrow morning around 9am when I will provide my review of the report.

LD

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